People’s savings (called the “overhang”) were wiped out with hyperinflation. Privatization was not accompanied by new investment. The economy was not industrialized, but financialized.The proceeds from privatization were deposited by the Russian government in private banks where the money was used to privatize more Russian assets. The banking system thus served to finance the transfer of ownership, not to fund new investment, and the proceeds were transferred abroad. Russia was turned into a financial colony in which proconsuls created wealth at the top.

Although Putin is a leader and has a sense of Russian purpose, many officials use their office not in service to Russia but in service to their own wealth, much of which is held abroad. Corruption and embezzlement seem to be the purpose of many office holders. Scandals abound among members of government and reflect badly on Putin and Medvedev.

The Russian government and central bank have been blinded to the fact that Russian infrastructure projects and private investment are not dependent on borrowing dollars abroad or by acquiring dollars by selling Russian assets to foreigners.Such projects can be financed by ruble creationby the Russian central bank. Money that flows into productive projects that raise output is not inflationary. Generally speaking, such projects lower costs.

“Western leaders, warned in advance of the assault, promptly declared support, but urged a speedy return to constitutionality amid fears that the Russian leader could become a political hostage to the armed forces.